Insolvency / Community Property

I can't help you with the community property question hopefully someone will. But I have had to fill the insolvency worksheets out and I did one for each time a debt was settled. For instance last year I had 3 cc's settled. the first in July so I went and figured out what bills were due at that time, what my bank balances were and what assets I had. Then I was able to figure out what liabilities I had and I did this for each account as it was settled. It is easier to do it when the debts are settled rather than go back and try to figure it all out. When I did this I was insolvent for each and I expect to be insolvent next year as well.
Good luck

Thanks alot [URL="http://www.debtconsolidationcare.com/forums/member.php?u=137057"]Rchechuck[/URL]. That's what I was planning to do as well (one worksheet for each account settled) but my accountant says it will confuse the people at IRS. She is a very experienced accountant but I feel she never dealt with insolvency.

So in your case IRS received 3 worksheet (asset and liabilities) but one form 982, right?

thanks again.

You don't actually send in the insolvency worksheet with the tax forms. Your accountant should take the figures from the worksheet and plug it into the tax forms (we have H&R Block do ours) and she has done this a long time. Keep the worksheets with your tax return so that you have proof of what you did and how you figured out the amounts. Ours are kept right with our copies of the returns. The only form that gets filed with your tax return is the 985 or what ever the number is on that form. Ask your consultant if she has worked with insolvency before if not you may want to go to H&R for the next years tax season just because if you are audited they will go for you and you don't have to as long as you pay the "Peace of mind" fee or what ever it is called.

i have settled 2 accounts earlier this year, and 7 more within the last month. i did an "insolvency" worksheet before each settlement was paid..even if i had 3 or 4 paid the same day.... i filled all info on each worksheet , except for in assets, the bank account balances & cash ( i did fill this on the first one i did on a day). then as soon as i got my bank statement, to see which payment cleared the bank first, second, third, and so on, i entered the correct balances... i also created a ms spread sheet each time too, that is almost identical to the insolvency worksheet, and i made columns for "before settlement", "total balance of card settled", "balance after settlement" then "amount cancelled" & "amount paid"... after each settlement i printed the spreadsheet out, the changed the amounts in each column for the next one... that way i have covered all the basis along the way... i have them all ready to take to an accountant that has done insolvency tax forms, and see if i can get the 982 form and such done before the end of the year, before the mad rush hits them.... i want to have everything in order, so that as soon as we get w2, my 1099 for ssdi benefits, and 1099 c forms, i am ready to file and get our tax refund back...

Thanks for your post. I very much regret that I forgot to do the worksheet before.
Will you not be filing the worksheet as the previous poster?

Now, I am confused as to what date I should be using for the asset and liability? Per the IRS's instruction, I need to use the date just before the debt cancellation. You used the checks clearance date but I was using the date that I got the letter from the bank.
Did you have community property involved?

hi- just to explain... no, i did not actually use the check's clearance date.. i just used that as to know which order to do the insolvency form (with assets and liabilities) in the proper order in re of money in the bank accounts. i had 3 settlement checks hit the bank the same day, and the agreements were done by phone the same day prior to that. as i didnt write down the time of each phone call, i figured this was the easiest way to handle it...
if i did the date of the actual check hitting the bank, i would not be quite so far insolvent, due to bills that were paid out of the account between the date of phone agreement and the date the check hit the bank- as i paid utilities, car payment, insurance and other things in between those dates...